REINSURANCE

The Company uses reinsurance as part of its risk management and capital management strategies for certain of its living benefit guarantees and variable annuity base contracts. Through March 31, 2016, the Company reinsured its living benefit guarantees on certain variable annuity products to Pruco Re and Prudential Insurance, which are the legal entities in which the Company previously executed its living benefit hedging program. Effective April 1, 2016 the Company recaptured the risks related to its variable annuity living benefit guarantees that were previously reinsured to Pruco Re and Prudential Insurance, as discussed further in Note 1. In addition, the Company reinsured variable annuity base contracts, along with the living benefit guarantees, from Pruco Life, excluding the PLNJ business which was reinsured to Prudential Insurance. This reinsurance covers new and in force business and excludes business reinsured externally.

In the fourth quarter of 2015, the Company surrendered its New York license. The Company recaptured the New York living benefits previously ceded to Pruco Re, and reinsured the majority of its New York business, both the living benefit guarantees and base contracts, to Prudential Insurance. See Note 1 for additional information. Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements. The Company believes a material reinsurance liability resulting from such inability of reinsurers to meet their obligations is unlikely.

Realized investment gains and losses include the impact of reinsurance agreements, particularly reinsurance agreements involving living benefit guarantees. These reinsurance agreements are derivatives and have been accounted for in the same manner as embedded derivatives and the changes in the fair value of these derivatives are recognized through "Realized investment gains (losses), net". See Note 4 for additional information related to the accounting for embedded derivatives.

Reinsurance amounts included in the Company's Statements of Financial Position as of December 31, were as follows:



	2018			2017
	(in thousands)
Reinsurance recoverables	$	572,102		$	563,428
Deferred policy acquisition costs	3,703,166			3,766,066
Deferred sales inducements	476,608			540,389
Value of business acquired	(2,431		)	(2,702		)
Other assets	79,992			105,167
Policyholders’ account balances	3,098,537			2,825,030
Future policy benefits	5,680,939			5,511,496
Reinsurance payables(1)	232,937			262,588
Other liabilities	290,330			329,019


(1)	"Reinsurance payables" includes $0.1 million of unaffiliated activity as of both December 31, 2018 and 2017.

The reinsurance recoverables by counterparty are broken out below:



	December 31, 2018		December 31, 2017
	(in thousands)
Prudential Insurance	$	335,349	$	310,758
Pruco Life	236,716		252,383
Unaffiliated	37		287
Total reinsurance recoverables	$	572,102	$	563,428

Reinsurance amounts, included in the Company’s Statements of Operations and Comprehensive Income for the years ended December 31, were as follows:



	2018			2017			2016
	(in thousands)
Premiums:
Direct	$	37,895		$	33,908		$	39,326
Assumed	31,989			32,890			860,831
Ceded	(2,619		)	(3,225		)	(3,318		)
Net premiums	67,265			63,573			896,839
Policy charges and fee income:
Direct	549,500			622,099			647,226
Assumed	1,661,484			1,632,132			1,153,752
Ceded(1)	(39,706		)	(44,652		)	(45,754		)
Net policy charges and fee income	2,171,278			2,209,579			1,755,224
Asset administration fees and other income:
Direct	96,743			129,847			103,892
Assumed	301,549			293,275			205,221
Ceded	(9,136		)	(9,747		)	(9,729		)
Net asset administration fees and other income	389,156			413,375			299,384
Realized investment gains (losses), net:
Direct	81,120			(1,335,253		)	(3,612,578		)
Assumed	823,129			554,686			(81,510		)
Ceded	(20,176		)	(24,833		)	251,328
Realized investment gains (losses), net	884,073			(805,400		)	(3,442,760		)
Policyholders' benefits (including change in reserves):
Direct	81,045			52,477			74,438
Assumed	110,358			46,375			553,280
Ceded(2)	(4,315		)	15,216			(23,661		)
Net policyholders' benefits (including change in reserves)	187,088			114,068			604,057
Interest credited to policyholders’ account balances:
Direct	127,018			9,834			74,389
Assumed	132,324			24,708			(1,551		)
Ceded	(10,167		)	(4,262		)	(3,949		)
Net interest credited to policyholders’ account balances	249,175			30,280			68,889
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization	1,131,351			725,749			563,027


(1)	"Policy charges and fee income ceded" includes $(1) million, $(2) million and $(2) million of unaffiliated activity for the years ended December 31, 2018, 2017 and 2016, respectively.


(2)	"Policyholders' benefits (including change in reserves) ceded" includes $(0.3) million, $(0.1) million and $(0.3) million of unaffiliated activity for the years ended December 31, 2018, 2017 and 2016, respectively.